Tag: amc theaters

Universal Trolls Theaters, Theaters Demand Tax Be Paid

The future is in play, right now.

Over the last week or so there has been an escalating war of words between Universal Pictures and a handful of theater chains? The object of their disagreement is just what role each party has to play in the continued business model of the other.

The inciting incident in this particular fracas, the equivalent of Archduke Franz Ferdinand being assassinated, was the release of Trolls World Tour a few weeks ago. Universal made the unusual – even unprecedented – decision to release it straight to premium VOD early last month because all the theaters were closed, a result of precautions taken in the midst of the Covid-19 pandemic still sweeping across the nation and world. Not wanting to lose the momentum of the marketing campaign that had already been running with a delay, the studio opted instead to break ground it and others have been eyeing for a while.

Before the release, NATO made it clear theater owners would hold a very large grudge for a very long time against Universal for making such a move. There wasn’t much that could be done to stop the wheels that had been put in motion at the time, but it was apparently necessary to make public statements like this in order to communicate the displeasure of NATO’s members at having been called, essentially, irrelevant.

Since then it has called out the success of this strategy, touting positive sales numbers for a digital release and appeared in the Top 10 titles on Amazon Prime when it was first available.

More recently it’s gotten very awkward. Here’s a short recap:

Universal: This has turned out very well, to the tune of about $100 million.

NATO: Shut up! People love the theatrical experience.

AMC: We’re so put out by this we’re refusing to play any Universal movies in the future after theaters reopen.

Regal Cinemas: Same, and every other studio needs to make sure it doesn’t even think about shortening the theatrical-to-video window.

Universal: We intend to make premium VOD something we consider regularly along with theatrical release.

Today it made good on that promise, announcing The High Note would no longer be getting a theatrical run but would instead be going to premium VOD later this month.

As Julie Alexander pointed out on Twitter, there’s a lot of context that has to be considered among all this rhetoric. Namely, that studios have wanted to experiment with premium VOD for a decade or so, but theaters have always pushed back, using their power to draw mass audiences as leverage. But, as other people have said, their refusal to even allow that experimentation or be part of the solution means they have effectively locked themselves out of conversations they could be benefitting from right now. And the leverage they once had has diminished as ticket sales – which is different from ticket revenue – declines year to year. Theaters are in a much worse negotiation position than they were a decade ago.

Universal was first through the door and as such seems to be drawing the bulk of the fire from opponents of this new tactic. Warner Bros. isn’t too far behind, though, as it announced last month its animated Scoob! will skip theaters as well. And Disney is going one further by pulling Artemis Fowl from theaters and putting it on Disney+ in June.

Some have argued that the Great Recession didn’t kill theaters even though VOD was a viable option at the time. That’s true, but streaming wasn’t nearly the powerhouse it is today, and it certainly wasn’t the case that each company had its own platform it was working overtime to monetize and turn into a Netflix-killer.

In other words, the landscape today is very different, and the closure of movie theaters may be an even more drastic moment that was originally foreseen. Studios may finally realize that theatrical release is optional, not necessary, especially for films that don’t seem to care much potential for awards consideration.

What will be interesting to watch is how, if at all, the marketing changes for these direct-to-VOD releases. Will they have the same level of promotional partnerships as their theatrical cousins? Will they receive similar advertising spending and media planning? Trolls was an aberration in that the campaign was already so far along, but we could see outside companies pull their support if they know the movie isn’t going to theaters. Or deals could change to become more contingent on what release a movie is ultimately given and how it succeeds. In other words, it could become much more like the entire rest of the advertising world, where results are what matter.

Theaters are likely past the point where they can significantly alter the future of how studios will approach their release strategy. The bluster that’s been going back and forth in the press is more about negotiating upcoming contracts than anything else, as it’s not quite plausible a massive chain would outright refuse to play films from a studio like Universal. But AMC had to say something in order to assure stakeholders – including the banks holding the company’s massive debt load – it wasn’t going gently into that good night.

No one, least of all myself, wants to see theaters disappear. But they have gone from the only game in town to the best game in town to merely one of the games in town, with its own set of advantages and disadvantages. The label “direct to video” no longer carries the derogatory connotations it once did, largely because of the investments made by studios into quality material.

While there are a number of unknowns still floating out there, what seems to be clear is that this isn’t the end. Studios can’t keep punting releases down the calendar indefinitely, as eventually there will be too much backlog for theaters to handle. And those releases will be so tightly packed the studios will be tripping over their own feet. More premium VOD titles will be announced, and the theater chains will fall farther behind the times as audiences become more used to this kind of offering.

The future, in other words, will not wait for anyone to catch up with the present.

NATO: Fewer People Went to Theaters in 2019

We’ve already seen that box office revenue was down in 2019 by a noteworthy 3.9 percent. That news in and of itself was bad enough given how up and down the last few years have been, with the fate of the industry riding largely on how much it can pull from a handful of blockbuster franchise releases.

Last week another wave of bad news hit when the National Association of Theater Owners revealed attendance – the actual number of tickets sold – fell 4.6 percent in 2019 from 2018 levels. The only reason, then, that the revenue drop wasn’t as big was that the average price of a ticket (including premium formats) was up to $9.37 at the end of the year.

While movie-going is still an enormously popular activity, the trend continues that it seems to be increasingly one available primarily to the well-off.

As Erik Hayden at THR points out, that average movie ticket price is higher than the monthly subscription rates for Netflix, Hulu, Disney+ and other streaming services. And right now 39 percent of respondents to a recent survey are paying for three or more such services (including music) at a time.

For the consumer, then, it comes down to value. $9.37 can buy one movie ticket, but it comes with the obligation to make the necessary arrangements to leave the house. And how often are people going to the theater themselves, and what other activities are they adding on to that trip? Even a solo trip will likely end up costing significantly more than that.

Compare that to the $7-10 a streaming subscription cost, which comes with far fewer additional burdens. While each service has its own library of material, the options available on any one of them are substantive enough to keep most people occupied for hours if not days. And the perceived risk involved is much lower, as blowing $9 on a single movie that winds up being a dud is a huge disappointment while the couple hours you invest in a movie on Netflix is fine since you can check your email as you finish it with few regrets.

What Does the Audience Want to See?

At some point the theatrical exhibition chains are going to have to figure out how to live in a world that includes both their business and that of the streaming producers, who continue to bank on the idea that original features and series are the key to success. The stocks of AMC Theaters, IMAX and others took a hit at the end of last year because of big-budget bombs like Cats and even the perceived disappointing results of Star Wars: The Rise of Skywalker.

But those are the movies they booked, influenced in part by the studios who put on persuasive presentations at CinemaCon and assurances that people will come see known properties. Meanwhile, they keep shunning anything that comes from Netflix, even if it’s from high-profile filmmakers and comes with massive buzz attached. Netflix may have far fewer titles than it did a few years ago, but it has proven a serious player in the awards game and that’s come with the subsequent industry attention.

So, then, how interested in the future of movies are the theater chains? And what do they see their role being? Their core business model, after all, means they are at the whims of studios that make questionable decisions for a number of reasons without substantive input on those decisions.

If people are willing to pay $25-30/month combined for a two or three streaming subscriptions but continue to signal they are balking at the $9+ for a movie ticket, there’s no clear path for theaters to adjust their business models other than to keep jacking prices up, getting more out of a shrinking pool.

That seems unsustainable in the long term, but perhaps those in charge are just hoping to get through the next quarter unscathed and then leave it for the next person to figure out. The choices being made now, though, will have serious repercussions for everyone, especially the audience.

Movie Theaters Begin Their Adjustments

The news coming out of the second quarter is that movie ticket prices inched up a bit but are still down from the high they reached a year ago. But at the same time both revenue and actual ticket sales are down, 3.8 percent and 2.5 percent respectively. The second quarter was better than the first, with almost all the growth coming from Disney’s biggest releases.

At the same time, reports are coming out that theater chains are interested in experimenting with variable pricing models for tickets. Premium exhibition formats already cost more but they want to be able to charge different prices for different movies, with higher prices for the most in-demand films like the Marvel Studios blockbusters and less for the kind of mid-level and indie movies that have recently tanked or at least underperformed.

Part of that anxiousness to mix up the pricing model is the realization that MoviePass was kind of a good idea, adding significant amounts to the box office take for those smaller, non-franchise movies because the barrier to experimentation was reduced to almost nothing. That’s the same reason people are choosing to stay home and watch the latest “sure, that looks fine” release on Netflix or binge a buzzed-about series. To counter that, more theater chains are implementing their own subscription plans. Otherwise audiences will stick with the known quantities and safe bets coming out of Disney instead of trying anything new.

Doing so is an attempt to accomplish a handful of things:

  • Get more people in theater seats. Data from the days when MoviePass wasn’t an ongoing dumpster fire showed that the service notably increased the number of people heading to theaters. As of now services like AMC Stubs A List have released subscriber numbers but not (unless I’ve missed it) information on how it’s moved the needle on actual ticket sales beyond vague statements about members seeing more movies than they otherwise would have and concession sales rising as a result.
  • Build brand loyalty. One reason chains didn’t like MoviePass was that it was good in most any theater. That sort of level field is one big companies in any industry don’t like playing on, so they pushed back. If you can lock someone in to your own brand, though, you build in repeated instances of the desired behavior and make the opportunity cost of switching too high. It’s why you haven’t actually deleted Facebook, because it’s where all your friends and family are.
  • Get that sick data. More than anything else, the chains want the data. They want to get the demographic information about their customers, find ways to gain insights into their other behavior and habits. All of that can then be used to target ads and other promotions on behalf of studio partners, increasing revenue streams.

Where this gets interesting is that any alterations to the theatrical pricing model significantly impact studios’ marketing efforts for their movies. If an individual knows their local theater does or doesn’t implement variable pricing it’s going to change their perception to and reception of the campaign.

And studios will be able to track how that plays out.

Let’s use the weekend of 12/20 as an example and presume that select theaters charge more per ticket for Star Wars: The Rise of Skywalker than they do for Superintelligence, the upcoming comedy from Melissa McCarthy.

If ticket sales for Superintelligence are higher in Zone 1 than they are in Zone 2, Warner Bros. will be able to see part of that is because more theaters in Zone 1 have variable pricing models and charged less for the comedy than they did for Star Wars. In Zone 2 sales were lower because ticket prices were level and people chose the familiar over uncertainty. People still went to see Star Wars, of course, but because there was little risk involved and the incremental cost reduced or eliminated they went out later in the week to see something else.

Now consider what can be done with those insights. More TV spots could be run in Zone 1 for movies similar to Superintelligence and more online ads targeted to people in those locations. There’s more ROI to be had through that kind of targeted marketing than a more evenly-distributed campaign. Some of that marketing is even done through the apps theaters are using for their subscription loyalty programs because, again, that’s who now owns a good chunk of valuable data.

What happens then is that those in Zone 2 see even fewer ads and other marketing elements for non-blockbuster franchises because the data models predict they’re less likely to take a chance on an unknown quantity. Cultural hegemony is reinforced by reducing exposure to messages that challenge the most powerful ideas.

We’re about to see how something like this plays out in real time. AMC has been aggressively promoting its Artisan Films program to keep smaller movies on screens for longer periods of time so people who catch word of mouth have an opportunity to see them. That includes in-theater signage and even custom trailers for those movies that include an Artisan Films callout.

The key becomes apparent when all of this is put together.

First, a small movie that didn’t receive a big nationwide campaign is kept in theaters for more than two weeks before being booted because it’s not performing at the same level as the latest blockbuster. So more people are catching the positive buzz coming from those who already saw it, including critics.

Second, the campaign itself from the studio is run differently because marketers know it’s still in theaters in select markets. More TV spots are run and online campaigns are lengthened to keep reaching potential audiences.

Third, members of the audience more easily make the decision to see it because either A) the ticket price is lower than usual due to variable pricing models or B) the cost is zero because they belong to the chain’s subscription plan.

Disney’s box-office dominance has already changed how movies in general are released, forcing studios to scramble for the few Disney-free weekends or become more creative with their marketing efforts to cut through the carpet-bombing campaigns run in support of super heros and remakes. Shifts in how exhibitors handle these smaller releases may be good for indie filmmakers and audiences, but it also means that power is being consolidated at that end of the pipeline, which could create its own set of problems in the long run.

What To Make of 2018’s Movie Industry Landscape

The headlines began with a couple weeks still left before the end of last year, hyping that movie ticket sales had already reached $11 billion. The final tally wound up being just shy of $12 billion, a record-setting number that was 6.7 percent over 2017’s final haul. Disney was responsible for a quarter of that all by itself, thanks largely to the massive success of Black Panther, which was never overshadowed even though it came out all the way back in February. A late burst from Spider-Man: Into the Spider-Verse, Aquaman and a few other releases helped push it over the top.

The news is even better globally, with worldwide box-office up to $41.7, with the U.S. domestic market leading the growth for the first time in a long while.

What remains to be seen is how things fared in terms of actual tickets sold. It’s estimated to be around 1.2 billion, which would be about five percent higher than the dismal showing of 2017, when attendance was at a 25 year low. That’s still well off the high of several years ago, a trend attributable to several factors including the high ticket price, the speed at which new movies come to home video and more.

Diminishing theatrical audience numbers have been masked by the focus on total sales, which has steadily increased thanks to rising ticket prices due in part to prestige formats like Dolby, IMAX, 3D and so on. Attendance figures were also helped by the popularity of MoviePass, which has done everything it can in the last six months to erase consumer goodwill.

There are, of course, lots of lessons being offered given those dollar amounts. Various op-eds are pointing to the resurgence of movie theaters, thanks in part to Hollywood studios releasing popular films throughout the year instead of grouping them all in three months of summer. And those releases have been more diverse than in recent years, though while more black directors enjoyed more success the number of female directors continued to be flat.

A recent study found little cannibalization by streaming of the moviegoing experience. Instead it seems that the two sit side by side, each fulfilling a different need in the audience and serving them unique material to enjoy. Given the study was commissioned by the National Association of Theater Owners, it’s not surprising the angle taken is that theaters are doing just fine. Some harsh realities are brewing not far below the surface, though, that could make 2019 an interesting year for the entertainment industry.

Streaming revenue has already topped that of theatrical exhibition, something driven by the proposition of higher value for the money. Netflix in particular tends to be the boogeyman haunting the dreams of theater owners and big media companies, who are either ready to launch their own streaming services to compete against it or sign deals to produce films for it.

Netflix has 55 original films a year planned, including upcoming releases from some of Hollywood’s leading filmmakers. And because they eschew all but a cursory theatrical release for most of those movies and are refusing to play by anything approaching traditional rules, they are threatening the validity of those rules.

It may be true that studios are once more in a position to grasp the Oscar statuette once reserved for the smaller independent players that trafficked in the kinds of films that garnered nomination. Left unsaid, though, is that they’re back in that position because those awards-friendly films have been produced by Netflix and others and are being shunned from prestige consideration. So the mass appeal blockbuster remakes, adaptations and sequels from the major studios are left as the only films available for nominating committees to choose from.

Netflix is simply making the kinds of movies the studios no longer are interested in, shown in stark relief this past summer when it put out a number of romantic comedies to address unmet consumer demand. When you look at the winners and losers at the box office last year, the “losers” category is filled with niche films that would play much better as streaming releases, where the barrier to entry for the audience is so much lower than taking a chance on an unknown quantity at the expensive theater. Even comedies, which once dominated the box office, are now a bad bet for studios and theaters.

It also remains to be seen how susceptible theatrical exhibition is to whatever form the looming recession will take. Also coming down the road is the potential lifting of what’s commonly known as the Paramount consent decree. That could prove devastating to smaller theaters who don’t have the safety of scale bigger players like AMC Theaters and other large chains do. If the number of movie houses with fewer screens, the ones that often operate in less affluent neighborhoods, begin folding it will create fewer people who have any theatrical experience available to them, choosing instead some mix of legal and illegal streaming or downloading.

There are lots of unknowns and predictions are likely useless, despite what others making them may believe. What seems certain, though, is that 2019 will be a rough one. Netflix will continue to find ways to dominate the cultural conversation, stealing attention from theatrical releases that, in the coming year, seem somewhat lackluster. Further problems will develop from a mix of economic slowdowns and increased competition from all quarters as the same media companies that feed movies into theaters begin to divert some of that stream to their owned streaming services.

It’s also likely there will be a major shakeout in the streaming market. The consumer base simply can’t support all of these, and we’ve seen recently that when a service can’t achieve massive scale the corporate owners will shut it down.

Basically, 2019 is going to be a little rough.

AMC Theaters Girds Its Loins

Well, it finally happened: A major movie theater chain, in this case AMC Theaters, has introduced its own subscription-like movie ticket service seeking to compete against MoviePass.

[extreme John McClane voice] Welcome to the party, pal!

As I pointed out a couple months ago, this is the kind of innovation entrenched industry players rail against, which AMC has done loudly and often, because it’s something they should have thought of if they weren’t busy enjoying their protected status. Here are the details of how AMC Stubs A-List will work compared to MoviePass:

AMC Stubs A-List

MoviePass

Monthly Cost

$20

$10

Movies Allowed

Up to 3/week

Unlimited

IMAX/3D Showings

Yes

No

Multiple Movies/Day

Yes

No

Same Movie

Yes

No

On paper that looks like a slightly better deal. If you see two IMAX showings a month, the AMC plan has already paid for itself, and because it’s part of the chain’s Stubs loyalty program you continue to rack up points you can redeem later.

Yes, this validates the theatrical subscription model. But it’s a losing model. MoviePass’ parent company has seen massive stock price drops over the last few months as it hemorrhages cash. That’s part of the reason it introduced, at the same time AMC announced its offering, surge pricing, which would add a premium fee for in-demand movies just like Uber costs more during rush hour. The financials are so bad it’s setting up a bond sale to raise funds and stay afloat.

amc stub a list

So why mimic it?

AMC is clearly hoping premium formats, repeated viewings and widespread frustration with MoviePass’ horrific customer service and constant program changes will attract people. It’s also likely hoping audiences don’t use it enough to actually recoup that $20, which is the only way it will remain profitable. Indeed, in that article AMC’s CEO says profitability will depend on low usage, the same thinking Netflix used in the days of mailed DVDs.

Still, the challenges are obvious.

First, previous reports have shown MoviePass users not only saw more movies per month than they otherwise would have but saw a wider array of movies. Both are because there was no incremental cost and so the potential risk of wasting money on a movie that was only alright was low. It will be interesting to see if that remains true when repeated viewings of blockbuster franchise are available as a choice or if people still opt for breadth.

Second, that price point is pretty high. I understand that it comes with a lot of perks, but $20/month is well above what people are paying for Netflix, Amazon Prime or any other subscription service at the moment. Studies have shown most people don’t want to pay more than $20 for streaming subscriptions and average three subscriptions already. They may not see the value here as worth it on an ongoing basis, content to either pay single-ticket prices for occasional theater outings or just skip it altogether.

Third, it’s launching at a time when the studios and media companies AMC and other chains depend on are increasingly going their own way, or making plans to do so. The potential value of that Stubs A-List price will be a lot different when Disney starts withholding theatrical releases in favor of its own streaming service.

Fourth, because it’s only good at AMC theaters locations it may simply not be applicable to vast swaths of people for whom an AMC location isn’t convenient. You can make the case that people might be willing to drive a little farther to take advantage of the price point, but that overlooks trends across consumer product categories, including movies, that “not having to go out” is the increasingly dominant deciding factor in making a purchase.

Finally, it’s yet another move to gentrify the moviegoing experience. Low-income households may be able to splurge on the occasional very expensive movie ticket to see something like Black Panther, but they may not be able to take on an additional $20 monthly expense. That may not sound like much, but it really is, especially if your circumstances mean that simply finding the time to take your kids to a movie is impossible because of your inconsistent work schedule.

It’s good to see innovation in the theatrical exhibition game. What AMC is doing, though, does little to address or account for some underlying and overarching issues with the industry and how it’s simply poorly positioned to survive in a media and retail model that’s vastly different from what it was 30 years ago. AMC continues to believe IMAX and 3D are the answers to every question and that the studios will always want theaters to be around. Neither of those are assumptions that should be made.

Chris Thilk is a freelance writer and content strategist who lives in the Chicago suburbs.